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Because I have never filed an insurance claim in my life and believed that what our agent sold us would be sufficient, I really didn’t do a lot of insurance research for our AirBnB. Lesson learned. So for those hosts out there who are in the same mindset as I was, I just want to post a friendly reminder to really do the research before you actually need it! If you didn’t see my last thread, a tree fell on our AirBnB recently and pretty much smashed it. We’re still waiting to see if it’s even going to be repairable or if we will have to rebuild completely (it’s an older mobile home and has major structural damage.)
Is your policy an Actual Cash Value (ACV) policy or a Replacement Cost (RC) policy? It likely won’t say anywhere on your policy, so you’ll have to do some digging and/or talk to your agent. Be aware that if you have an ACV policy, every single item that needs to be repaired or replaced will be subject to depreciated values. So if your roof is damaged but is 20 years old, you will only get paid for what a 20-year-old roof is worth (which is nowhere near what a new roof costs!) For major damages, this could be a HUGE difference in costs. We’re talking like tens of thousands of dollars. Also know that RC policies are not always available, depending on where your home is and how old it is, so be prepared for out of pocket costs after your ACV policy pays out. (Our agent said that it probably wasn’t an option on our policy based on the age of our home.)
How will an adjuster calculate repair costs? Is it based on your local contractor/supply costs, or is it a generic price calculator with average construction costs used? (I’m still not very clear how that works on my own policy.)
Does your policy cover loss of income? Landlord policies commonly have that option, so if you depend on your AirBnB reservations as a significant source of income, be sure you add that coverage to your policy! My agent didn’t bother to tell me that was an optional add-on to my policy, so for the entire time my home is empty and waiting for repairs to be completed, we have zero income.
I’m sure there are more things that people should be researching on their insurance policy, so feel free to add to my list! I’m learning as I’m going through the claims process, which is not fun.
Again, my sincerest best wishes. This sucks. Thanks for taking the time to share what you are learning.
Also, more coverage and add ons cost money. So many people opt to do without them. Many even opt for no insurance whatsoever, just hoping for the best. We’ve had dozens of posts from people looking for affordable insurance. It would be interesting to know what is covered for those who have found affordable insurance.
We also see people who say by the time you pay for insurance, taxes, fees, upkeep, etc., Airbnb just isn’t worth doing.
Yes, most definitely. But for us, when we’re relying on this as a significant source of income, it would have been worth adding those things. For the more casual host that just rents out a room in their home occasionally or something, probably not worth it.
Also be aware that if you have not gotten special Short Term Rental insurance your regular home owners policy will likely not only not cover any damage (even if not STR related) but they will cancel your policy. The Airbnb Liability is not something you can really rely on. I use Proper insurance (which is 2x the cost of my regular home owner insurance). I’m going to double check on a few of the items the poster mentioned. Thanks.
So incase anyone is interested I did check with my STR insurance - Proper Insurance and I was very pleased to learn:
Your policy is full replacement cost
The adjuster will only determine the initial ACV reimbursement check value using everything you mentioned, and then as you continue to repair the property we will continue to reimburse you for expenses above that, up to your policy limit.
There is actual loss sustained in gross revenue coverage on your policy, yes
Everything a normal homeowner’s policy covers, this does too, in addition to all the business coverage you need
My contact is Taylor Stults firstname.lastname@example.org You can tell her Lynn Parisi referred her.
Hmm. Number 1 and 2 seem to be contradicting each other. If they are using ACV to calculate reimbursement, then you do NOT have an RC policy, you have an ACV policy. My policy will also continue to reimburse me if we incur additional expenses, up to my policy limit, but at a depreciated rate. You need to get clarification because either that agent doesn’t know what they are talking about, or they are intentionally trying to be confusing with their answer.
I would be curious what they cover for loss of income. Is it full reimbursement for your gross income, or a percentage of your average gross income?
It would be interesting to know how they figure that. It has to be some number based on the past but in reality you are still losing because you would probably make more in the future, especially for a host just starting out like you are. I’ve made more on Airbnb each year I’ve done it.
So here’s the reply (and quite speedy) from the agent email@example.com:
Allow me to clarify.
What I said was the initial check the adjuster writes is ACV, but the policy is true RCV because as you provide us with receipts for further repairs and upgrades, we directly reimburse you up to your policy limit. Depreciation is never taken in to account.
For example, If you lose an older couch with a depreciated value of $4,000 in a fire, and then when you go to buy the new couch its $10,000, you will get the $10K full replacement cost VS the depreciated $4K based on the ACV of the couch. Per my email below, its important to include that “as you continue to repair the property we will continue to reimburse you for expenses above [the ACV limit], up to the limits outlined on your policy”. The coverage is true replacement cost valuation for both building and contents.
As far as the income goes, this policy is called ‘actual loss sustained in gross revenue’, so the adjuster will take in to account future, present, and previous bookings, as well as take in to consideration what other similar properties of like offering are grossing in revenue during that time of year in that area. We’ll pay you what you actually would have made during the time you are unable to rent in the event of damage with no percentages taken in to consideration. We will pay until the repairs are finished, or until the limit on the policy has been reached.
The liability the state requires is exactly what you have! $1,000,000 in off premise commercial liability extending both on and off the insured location to cover any and all 3rd parties (including your neighbor down the street). You are within compliance
Believe me, I would never try to be intentionally confusing, and I want to thank you for allowing me to clear things up!
Interesting. So if you plan to replace the property, this would work in your favor. If instead, you decide you are going to take the insurance money and go on vacation instead (which is generally your prerogative with an insurance payout), you are getting screwed because you are paying a premium for a RC policy but only getting paid for ACV.
Most people obviously will replace their items. But in my case, the damage to our mobile home is so significant that we will likely have it demolished and sell the lot. We just don’t want to deal with the headache of rebuilding, not to mention the months and month it would take to rebuild, with no income during that time. (If only I had that loss of income coverage!) So because I’m not replacing the home with a new one, my payout remains at the lower ACV (in your scenario) rather than giving me the full replacement cost of the item that I paid a premium on.
I just did some googling, and it seems this is a pretty standard way to pay out insurance claims. So there’s another good thing for people to know, that you won’t actually get that full replacement value that you paid for unless you replace the items!
eta: I am still curious about that loss of income coverage… it seems that they would be basing your payment on what other hosts in the area are making? That could work for or against you, depending on your location. Something to keep in mind.
Just had to weigh in here. I am a new host AND have an insurance brokerage.
The reason that insurance companies first give you ACV and then Replacement cost after you replace the item is that you are not supposed to profit from insurance. It is supposed to “make you whole.” There are some policies that cash you out, but they are high end policies that most of us would not want to afford for an Airbnb.
I hope that anyone who reads this post just keeps in mind that a standard homeowners policy is intended for an owner occupant and will exclude any business use, as Airbnb is. Just check with your agent to make sure you have coverage. It is hard to find. I have a business owners policy as well as what is called a Dwelling Fire. There is some redundancy but the Airbnb use is covered and full replacement cost.
And I am SO sorry that this has happened to you. We emphasize with our clients that they have to tell us everything! But we are a brokerage so telling us does not jeopardize your policy as it does with some companies where the agent you deal with is actually an employee of the insurance company.
It is so easy to make assumptions. Trust me, I have screwed up my own coverage - its the shoemaker’s daughter syndrome - and have also paid a heavy price.